Contractors with their eyes on hot-button issues such as cybersecurity legislation, information technology (IT) acquisition reform, and strategic sourcing policy have plenty to consider in the 2015 National Defense Authorization Act (NDAA) and a recent policy memorandum issued by Office of Management and Budget (OMB) Administrator Anne Rung. Some key items to consider:

Cybersecurity: In 2015, the Department of Defense must issue rules requiring “operationally critical contractors” to report cyber incidents in their network and information systems.

IT Acquisition Reform: Under the Federal Information Technology Acquisition Reform Act (FITARA), Chief Information Officers in Federal agencies will take key roles in the acquisition process, which could affect the nature of IT-related acquisitions for years to come. FITARA also sharpens the Government’s FOCUS on strategic sourcing.

Strategic Sourcing and Category Management: In an initiative that complements strategic sourcing, OMB has established “category management” as a key Federal acquisition strategy, which will foster Government-wide purchasing of items, such as IT hardware and software, by one source instead of through multiple agencies.

For a broad array of contractors, those “operationally critical contractors” working with the DoD, providers of IT-related supplies and services, and those supplying “categories” of supplies throughout the Federal government, these changes will affect their daily operations and how they market and sell to their Federal customers in 2015 and beyond.

As part of the Federal Strategic Sourcing Initiative (FSSI), the Office of Management and Budget (OMB) and the General Services Administration (GSA) have created a Prices Paid Portal. The goal of the Prices Paid tool is to reduce total cost of ownership for goods and services by providing greater visibility on the prices agencies have paid for them.

The Prices Paid Portal is part of an ongoing effort to collect transactional data across the government. The challenge in managing pricing data is to ensure it is used to identify contracting strategies and/or terms (like volume commitments) that increase competition and deliver greater value to the American people. Unfortunately, current data management practices will likely reduce competition and value over the long term.

Sound management of pricing and procurement data requires discipline, sophistication, and, most significantly, an understanding of markets and how companies respond to competitive dynamics. Moreover, price alone is incomplete data. In order to effectively understand pricing, one must have access to and understand the underlying terms and conditions, contract commitments, market and economic forces that drive pricing. Price is only one data point in determining “total cost of ownership.” An accurate measure of “total cost of ownership” includes much more than just price. It also includes acquisition cost (i.e. how much did it cost to conduct the procurement), operational costs, maintenance costs, and disposal costs. The emphasis solely on prices paid data ignores these fundamental cost elements.

The Office of Management and Budget wants agencies to have greater transparency into contractors’ past performance before they sign on the dotted line.

Through additional guidance it hopes to help agencies better assess which vendors they should and shouldn’t work with.

“We are a couple of weeks from issuing additional guidance that broadens the sources of past performance information,” said Lesley Field, acting administrator of OMB’s Office of Federal Procurement Policy.

This forthcoming guidance aims to provide agencies with timely information about how contractors are doing and will also help new entrants break into the federal contracting market, said Field, during a June 3 event in Washington, D.C. jointly hosted by the Association of Government Accountants and AFFIRM.

Federal agencies are strengthening programs to find and punish unethical contractors, and the efforts may have paid off in increased suspension and debarment activity, according to a new watchdog report.

Governmentwide suspensions and debarments have increased from 1,836 in fiscal 2009 to 4,812 in fiscal 2013, the Government Accountability Office reported (GAO-14-513). And at six agencies that had minimal suspension and debarment activity but made changes to staffing, guidance and the case referral process as recommended by GAO in 2011, the increase was even more dramatic. These agencies went from a total of 19 suspension and debarment actions in fiscal 2009 to a collective 271 actions in fiscal 2013.

The six agencies GAO studied — the Commerce, Health and Human Services, Justice, State and Treasury departments and the Federal Emergency Management Agency — all saw a big jump in their suspension and debarment activity in fiscal 2011, the year they began to address GAO’s recommendations for successful programs. The Justice Department, for instance, went from five actions in fiscal 2010 to 50 in fiscal 2011. Though all six agencies made improvements in the same three general areas GAO pinpointed — “a suspension and debarment program with dedicated staff, detailed policies and procedures, and practices that encourage an active referral process” — they emphasized different reasons for their increased activity level, the report said.

Competition for government contracts is becoming more cutthroat as federal spending shrinks by billions of dollars, with big companies swooping in on smaller ones and bid protests on the rise.

Routine contracts that in years past would have attracted just a handful of companies have become high-stakes bidding wars. Contractors are forced to make more aggressive offers, with slimmer margins. And industry officials say the gentleman’s agreement that often prevented losing companies from filing bid protests against their rivals has given way to a more desperate mentality.

The number of losing companies’ protests to the Government Accountability Office, which handles the vast majority of bid protests, has increased from 1,352 in 2003 to 2,429 last year. While that is a fraction of the total number of contracts awarded annually — less than 1 percent, by one estimate — the cases often show how tight the market has gotten and the extreme measures companies will take to win.

“Budgets are going down, which means competition for what contracts remain has increased tremendously,” said Jaime Gracia, president of Seville Government Consulting, which helps contractors win bids. Companies “are making strategic decisions about protesting because they have to. A lot of companies can’t afford to lose that contract.”

After the terrorist attacks of Sept. 11, 2001, spending on contracting soared. Fueled by the wars in Iraq and Afghanistan, it peaked in 2008 at about $541 billion, according to the Office of Management and Budget. But as the budget cuts known as sequestration went into effect, the figure dropped to $461 billion last year, and many predict it will continue to fall.

The General Services Administration (GSA) hasn’t developed a performance measure to determine small business participation in strategic sourcing initiatives and the Office of Management and Budget hasn’t monitored agencies’ efforts to include small businesses, a recently release Jan. 23 Government Accountability Office report says.

While documentation shows that agencies generally do consider small businesses in strategic sourcing contracts, the report says, there isn’t agency data and performance measures that would provide a more precise understanding of the inclusion of small businesses.

The Federal Procurement Data System (FPDS) can’t be used to track the extent of strategic sourcing across the federal government and its effects on small businesses because there is no strategic sourcing category in the system, GAO says.

Budgets cuts, contracting reforms and the military drawdown in Afghanistan have pushed government contract spending to its lowest level in more than seven years.

Government spending on contracts plunged almost $58 billion – 11 percent – to about $460 billion in fiscal 2013, according to the Office of Management and Budget and preliminary estimates from the Government Accountability Office.

Spending has fallen three of the past four years, from a peak of $550 billion in fiscal 2009 — and administration officials say more declines lie ahead.

“For fiscal 2014, we expect agencies to continue these smarter buying practices to deliver even more value to the taxpayers,” said Office of Management and Budget spokesman Frank Benenati.

Rob Burton, former deputy administrator of the Office of Federal Procurement Policy at OMB and a government contracts attorney at Venable, said the steep drop in procurement spending is the result of numerous factors and policies.

Sequestration, the continued drawdown of military operations in Afghanistan, along with OMB policies to encourage spending cuts such as strategic sourcing, all played a role, he said.

For two years, it has been the policy of individual agencies of the federal government to encourage prime contractors, upon receipt of progress payments from an agency, to accelerate payments to small business subcontractors. Now, this policy has been formalized by publication of a rule and contract clause in the Federal Acquisition Regulation (FAR), effective December 28, 2013.

Here is the background. The Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautical and Space Administration (NASA) originally published a proposed rule in the Federal Register at 77 FR 75089 on December 19, 2012, to implement OMB Memorandum M–12–16 that would provide for the acceleration of payments to small business subcontractors. OMB released Memorandum M–12–16, Providing Prompt Payment to Small Business Subcontractors, on July 11, 2012. This policy memorandum outlined the steps agencies should take to ensure that prime contractors pay their small business subcontractors as promptly as possible. OMB released Memorandum M–13–15, Extension of Policy to Provide Accelerated Payment to Small Business Subcontractors, on July 11, 2013. This policy memorandum extended the OMB
Memorandum M–12–16’s expiration date by one year to July 11, 2014.

With the publication of a formal rule in the FAR, the accelerated payment policy is now in effect, government-wide. Below is the clause that is to be placed in all federal contracts containing subcontracting opportunities:

FAR Part 52.232–40

Providing Accelerated Payments to Small Business Subcontractors (Dec. 2013)

(a) Upon receipt of accelerated payments
from the Government, the Contractor shall
make accelerated payments to its small
business subcontractors under this contract,
to the maximum extent practicable and prior
to when such payment is otherwise required
under the applicable contract or subcontract,
after receipt of a proper invoice and all other
required documentation from the small
business subcontractor.
(b) The acceleration of payments under this
clause does not provide any new rights under
the Prompt Payment Act.
(c) Include the substance of this clause,
including this paragraph (c), in all
subcontracts with small business concerns,
including subcontracts with small business
concerns for the acquisition of commercial
items.

Agencies on Friday began posting their contingency plans online to prepare for a possible government shutdown on Tuesday, Oct. 1. If the government closes, approximately 800,000 federal civilian employees could be furloughed. Those placed on unpaid leave will receive official furlough notices on Oct. 1, if necessary.

We’re compiling a list of agency shutdown guidance as it’s posted. We’ll continue to update this information over the next few days as agencies publish their plans. The Office of Management and Budget also will link to agencies’ guidance on its website. Click here to read the 2011 contingency plans that agencies prepared the last time the government nearly shut down.